Hurricanes, Risk, and Fiscal Collapse

Graphic source: Wall Street Journal

John Rubino, publisher of Dollarcollapse.com, and I think a lot alike when it comes to the inevitable fiscal collapse of the United States. The country (indeed the globe) is riding high today on a giant credit bubble right now, but sooner or later the bubble will pop and the economy will crash. If you buy into my Boomergeddon theory — that the U.S. will experience massive social upheaval when federal and state governments are unable to maintain their commitments to core services and the social safety net — you might want to check his website for your daily frisson of fear.

I, like John, have been writing about the dangers lurking in states’ unfunded pension liabilities and the exploding student loan liabilities that are undermining our institutions of higher education. I’d urge John to give more coverage to the issue of hidden deficit spending in the form of growing infrastructure-maintenance backlogs. (Read the Strong Towns blog for a primer on state/local governments’ growth Ponzi schemes.) Meanwhile, in a recent post, John drives home a point to which I have given insufficient attention: the future cost of hurricanes.

Unlike unfunded pensions, student loan defaults and maintenance backlogs, upon which we can put reasonable figures, there is no way for Virginia to budget for hurricanes. The incidence of hurricane hits is relatively infrequent and highly random and the damages are so variable from storm to storm, that budgetary forecasts are a total crap shoot. But I think we can safely say three things about Virginia:

  1. Sooner or later, another large hurricane will hit Virginia;
  2. Subsidence and sea-level rise, which will occur even in the absence of global-warming scare scenarios, will magnify the impact of major storms;
  3. Continued development along the shorelines of the Atlantic Ocean and Chesapeake Bay will lead to more storm-related damage.

John is concerned about the prospect of a monster storm hitting a big city like Miami or New York and giving us “a trillion-dollar summer” that bankrupts major insurance companies, roils insurance markets, depletes federal flood insurance reserves and forces the U.S. government into another massive bail-out “just as federal deficits are exploding, public sector pensions are imploding, and student loans are defaulting en masse.”

I, too, worry that the federal government is headed for disaster. But as I observe the proceedings in Washington, D.C., I have written off the federal government. Our political culture in Washington is so dysfunctional, so toxic, so addicted to short-term political gain, that the federal government is beyond salvation. I don’t waste a lot of intellectual bandwidth wondering what might save Washington. Nothing can. But I would like to ensure that the Commonwealth of Virginia survives the wreckage. Some government entity will have to carry on when the federal government melts down, and state government is the only alternative.

But I worry about Virginia, too. As I blogged recently, we have no idea what governments and quasi-state agencies — from the Washington Metro to local economic development authorities — have piled up in long-term debt, unfunded pension liabilities, and maintenance backlogs, much less how vulnerable they are to the next economic downturn. Now, add the risk of damage from hurricanes to roads, bridges, railroads, water and sewer facilities, coal ash ponds, the electric grid, pipelines, and other infrastructure. How prepared are our state agencies and utilities to cope with a major disaster? What would the impact be on taxpayers and rate payers, what have we set aside in reserves?

In a word: How fiscally resilient is Virginia in the face of natural disaster? Puerto Rico showed how a hurricane can push a corrupt and mismanaged polity over the edge. Surely we’d hold up much better. But that assumes Uncle Sam can continue handing out billions of dollars in disaster relief and that insurance markets are functioning. No one knows. We live in ignorance at our peril.

There are currently no comments highlighted.

10 responses to “Hurricanes, Risk, and Fiscal Collapse

  1. You and I agree, generally, although I am a bit more pessimistic. I predict a meltdown within the next two decades, likely war or revolution or both brought on by any number of factors and trigger points, all acerbated by the gross dysfunction of the our Federal Government, with the “so called Democrats” primarily to blame. We saw its most recent precursor over the past two weeks. This follows a whole series of dead canary events, including C’ville in 2017.

  2. Well , here’s the program the so-called fiscal conservatives and the GOP like a lot but is a rolling disaster – and that is the FEMA flood insurance program.

    When you talk about hurricanes and “risk” and “mega” – you’re missing the most important thing that that is what happened with Katrina, Sandy, Harvey and Florence and that is not wind damage but flooding.

    Billions of dollars of damage to properties that were built in KNOWN flood zones but were built anyhow then insured by the Federal Govt.

    All up and down the east coast from Myrtle Beach to Emerald Isle to Kitty Hawk – it’s all subsidized by the Federal Govt who then is responsible for the damage down by higher and higher, more and more widespread flooding from more recent hurricane surges coming in on top of more higher than usual High tides.

    And what has been the GOP’s response? They have OPPOSED generating flood maps… because such maps adversely affect property values….

    think about that. Think about that – we won’t generate flood maps because it will affect what properties the private sector will give a loan for. Nevermind, those same properties the govt will also subsidized insurance for.

    Between this issue and the big “tax cut” that has been financed by selling treasury notes to the Chinese – it’s hard to tell who is really a “fiscal conservative” any more….

  3. Yeah, Larry, last party meeting I attended was all about fighting off those damn flood plain maps. Uh, you do sleep with the light on, right? Barry Goldwater and Milton Friedman are hiding in your closet….ready to jump out and go boo!

    As to Jim’s fears, he’s right that hard times will come again, and many government promised will go unfulfilled, but the apocalyptic collapse he envisions does not keep me awake.

  4. A few nuclear devices exploded underwater off the west and east coasts will vaporize our concern regarding global warming,and DDT as a few blasts overhead up high will finish the job. The cyber attacks are beyond my comprehension. In any event, our party will keep going full blast over the Supreme Court etc. until then.

    • Jim says:

      “I, too, worry that the federal government is headed for disaster. But as I observe the proceedings in Washington, D.C., I have written off the federal government. Our political culture in Washington is so dysfunctional, so toxic, so addicted to short-term political gain, that the federal government is beyond salvation. I don’t waste a lot of intellectual bandwidth wondering might save Washington. Nothing can. But I would like to ensure that the Commonwealth of Virginia survives the wreckage.”

      This is the base level on which Jim and I agree.

      What I say, however, is that given the impending functional collapse of the US Federal Government, a fiscal meltdown will only be a part of a much larger collapse of America, its society, its defenses, and its historic ability to keep order in an otherwise highly disorderly world.

      Remember that a strong and dominate America is what has saved the world since 1940. The ongoing functional collapse of our US Federal government, which could only be one election away, and collapse of our society too, will bring the wrath of our enemies, and the world’s inherent natural disorder and chaos, down on America in a great multitude of ways.

      We were on that course of distruction two years ago, and in different ways those perils have g only grown more threatening.

  5. Unlike Jim – I do not subscribe to apocalyptic collapse though there is ample fodder to feed such fears!

    I DO THINK business interests oppose any expansion of flood risk zones that will affect the development potential of land.

    Those very same business interests support the tax-subsidized FEMA Flood insurance program.

    My point here is that Conservatives ascribe irresponsible tax and spending policies to the Dems – and rightly so – but the GOP is no stranger to those behaviors also and the subsidized FEMA flood insurance program is a good example and yes they don’t want updated FEMA flood maps that “devalue” more land …

Leave a Reply